This was the blog of a blacksmith.
Soot Happens, but you clean yourself up when you need to (even if it takes years). If you find that life isn't where you want it, just toss it back in the coals, bring it to heat, and reforge.

Wednesday, October 05, 2011

A Scout Is Thrifty

As a youth, I was heavily involved in the Scouting program and as a scout, I swore an Oath to, among other things, do my best […] to obey the Scout Law and keep myself […] mentally awake and morally straight. The Scout Oath is a personal one, it is not to the country, to BSA, or even to the troop. It is the scout's Oath to himself, and is "on [his] honor". As such, it is for the scout to handle should he break his oath. I have broken my Oath — parts of it, anyway; but to break a part is to break the whole. My honour demands that I rectify this breach, by taking the Oath once again, living by it, and making amends where I can.

This article is directed specifically at young men and women from ages in their mid to late teens, and generally to the population as a whole. With this article I hope to help you understand some concepts that I "knew" as a teen, but did not understand. Concepts I did not understand until well after my lack of understanding got me in trouble. Hopefully, you will come to understand these concepts and avoid trouble.

This article is focusing primarily on the ninth point of the Scout Law, as could be surmised from the article's title. Here is, best as I can recall, some of how I understood this point as a teen:

Spend your resources (money, time, energy, water, etc.) wisely.

Save your pennies.

Debt is bad; avoid it in general, but some debt is unavoidable.

It is the last bit that will be my primary focus, as it is the most important. Why is it important? Because I wasn't just wrong about it, I was dead wrong.

Disclaimer: Please keep in mind that from here on, when I refer to 'debt', I am referring to personal debt; business loans are a separate subject for another article.

Debt is not 'bad', debt is slavery. It is possible to avoid debt entirely, and each of us should strive to do so.

These are bold statements, and I will do my best to back them up so that you may understand them.

Debt Is Slavery

What is the difference between a free man and a slave? A free man is beholden to no one except by choice, and may make any choice and is entitled to the full fruits of his labour. A slave, by contrast, has some or all of his choices made for him and, in part or in whole, the fruits of his labour belong to someone else. With debt, we owe a portion of the fruits of our labour to the one to whom we are indebted.

There are several common debs out there, and I would say the three most common are house payment, car payment, and student loans. Three things the average member of the specific target audience of this article should not be dealing with yet (or at all, but more on that later). But the first one of these with a payment due for the average American is the car payment (on average, student loans may be the first debt accrued, but payments are typically not required while in school). Let us say your car note is only $200/month. Until that car is paid off (and thus, the debt you accrued for the car is gone), the first $200 you make each month is not yours, it belongs to whomever gave you the loan, your creditor. Until the debt is gone, the car, also, belongs to your creditor, and they may take it from you for non-payment on that loan. Let me go over that bit again, because chances are, you were just nodding along and not really paying attention: Until that car is paid off, the first $200 you make each month is not yours. If money you earn does not belong to you, you are a slave.

The "debt is slavery" concept is a simple one, so I am not going to spend much more of the article on it, but feel free to comment if you have any questions, comments, or disagreements with that concept, or anything else I present here.

Avoid Debt Entirely

There are a number of misconceptions out there, a lot of it due to untrue 'facts'. Most of the people who propagate these misconceptions are not doing so from malicious intent, but because they honestly believe these things to be true. Such misconceptions include (but are certainly not limited to):

debt is unavoidable

you need a good credit rating

you have to go to college so you can get a good job and make lots of money

It's okay to buy something on credit as long as you pay it off immediately

There are plenty others, but these are the ones I will cover now. The first one is the point of this entire section of this article. But I will provide you with some basic rules/ideas for avoiding debt.

Don't get a credit card (even, and especially a store card). There are a few exceptions to this one, but for the most part, just avoid them.

Don't buy anything you can't afford.

Save your money to buy more expensive items

Keep an emergency fund for those times that you need money unexpectedly (such as emergency car repairs)

Start small. It is far better to buy a working used car outright than it is to buy a newer/more expensive car on credit. Make a "car payment" to yourself in the form of a "new car fund" so that you can purchase a newer car free and clear later on. This works for anything, not just cars. It even works for houses.

Sell or rent things you no longer use. Sell your old car (after you buy the new car, this will start your next "new car fund"). Just purchased your second house (and did so without a loan), sell your old house to start your new property fund, or rent it out and turn the old house into a source of income. As you don't have a mortgage to pay, this becomes a lot easier, and you can be more competitive with your pricing.

Reduce your expenses by making your property work for you: plant fruit trees, grow a garden, do side/contract work from home, record a podcast from your car as you make your daily commute (this, by the way, is how The Survival Podcast by Jack Spirko got started).

Continually educate yourself

There are several others, and some of them will come as I cover the rest of the misconceptions above, but the point is that debt is easily avoidable, as long as you avoid it. Even small debts tend to pile up quickly, so it is best to avoid them all together.

The next misconception is that you need a good credit rating. This one is a half truth, it is missing its other half though: you need a good credit rating if you plan on taking out credit. If you avoid debt, then a credit rating is pointless to you, and the few things that do take your credit rating into account (like some utilities and banks) will improve your credit score just from proper use.

The third misconception,you have to go to college so you can get a good job and make lots of money, is wrong in a number of ways. The most glaring is that college is required for neither getting a good job nor for making lots of money,. Here are some facts and tips about college and student loans:

College is not for everyone.

For the people want to go to college, it is possible to pay with cash, it may mean working every other semester/year, or only taking evening courses, but it is possible.

Student loans are forever. Even if you should file for bankruptcy, you still have to repay your student loans.

It is quite easy to rack up more in student loans than can easily be paid off by whatever job you get after you graduate.

You will treat your schooling a good deal more seriously if you pay for every penny yourself beforehand, as you will know what it took to earn that money, and wouldn't want to waste it.

If you don't have any debt, you don't need lots of money to pay back those debts

In general, a man with no debt and real/professional/full-time job is far better off than a someone with debt making twice the money.

Finally, we come to the tricky one: It's okay to buy something on credit as long as you pay it off immediately. Why is this tricky? Because for most credit cards, technically it is true. You will accrue no interest if you pay your balance down to 0 each month. So, why is this a misconception then? Because it gets you in the habit of purchasing with credit. If you have the cash to pay it off at the end of the month, then just purchase it outright. If you won't have the case until your next check, wait a bit, then purchase it. If you get into the habit of purchasing on credit, some day, you will not pay it off, and that once turns to twice, and soon you're in debt to your ears. Will it always happen? No. But it probably will. It's best just to avoid it all together.

Hopefully, I've reached some of you in time, and you will heed my words and avoid debt. Now, for the rest of you. Those of you who, like me, already have debt. For those of you in the working world, think about how much of what you make each month goes to paying off your debts. Now, think of how different your life would be if you got to keep that money. I can't think of anyone who's life would reduce in quality if they were able to keep more of the money they earn. What can you do about it? Simple:

Pay off your debt.

Stop taking on new debt.

Pay more than the minimum payments on your debts

Follow as much of the advice I provided for the debtless as you are able

As one debt gets paid off, take all the money you were using to pay that debt to pay another.

Use a strategy to pay off your debts in a specific order, such as always paying off your smallest debt first, or always paying off the debt accruing the most interest first.

Save up an emergency fund

Get rid of your credit cards, you don't need them. If there's an emergency, that's what the emergency fund is for

Remember to breathe, if you find yourself getting too stressed out: relax, take a vacation — but don't go further into debt to do it.

A Scout is Thrifty, and hopefully, you have gained a deeper understanding of what that means and will become more thrifty yourself.